Unlocking Value: The Case for Utility Stocks Amidst Changing Interest Rate Dynamics

Investors generally buy utilities for one reason: income. Thanks to fixed costs coupled with steady cash flows, dividends for the sector are plentiful. Utility stocks are some of the highest yielding around – and thanks to their high yields and steadfastness of payout, they are often considered bond proxies.

That moniker is a huge problem when bonds are in a funk. The last year or so hasn’t been kind to the sector, with utilities underperforming the broader market by a wide margin.

But with the Federal Reserve finally starting to pause and think about rate cuts, fortunes for the sector could be changing. Its high yields could be very much in demand as many income rivals begin to pay less. With that, utilities could be a big buy.